United States of America v. Fancy Things Boutique, Inc. et al

Filing 19

Memorandum Opinion and Order by Judge Rodney S. Webb granting 16 Motion for Summary Judgment as to Dwayne C. Mortiz and Karen C. Mortiz. (LH)

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NORTH DAKOTA NORTHEASTERN DIVISION United States of America, Plaintiff, vs. Dwayne C. Moritz and Karen C. Moritz, Defendants. ) ) ) ) ) ) ) ) ) )

Case No. 2:08-cv-45

Memorandum Opinion and Order Plaintiff United States of America has moved for summary judgment as to Dwayne C. Moritz and Karen C. Moritz (doc. #16). The United States claims that the Moritzes failed to make payment on a valid and enforceable guaranty to the Small Business Administration ("SBA"). Furthermore, the Moritzes' bankruptcy

discharge did not extinguish SBA's right to foreclose its interest in the real estate mortgage granted to it by the defendants. Dwayne and Karen Moritz did not file a response to For reasons

the United States' summary judgment motion.

discussed below, the Court GRANTS the Plaintiff's motion. I. Facts Fancy Things Boutique, Inc., through Karen and Dwayne Moritz, as President and Vice President, executed a promissory note for $70,000 plus interest with the Community National Bank of Grand Forks, North Dakota on September 7, 1999. Karen and

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Dwayne also executed an Unconditional Guarantee whereby they guaranteed repayment according to the note's terms. The Moritzes After

also granted the Bank a mortgage in certain real estate.

the note was assigned to SBA, Fancy Things failed to make timely payments and now is no longer operating as a business. On

October 14, 2004, Dwayne and Karen Moritz petitioned for bankruptcy relief and received a discharge on February 7, 2006. Accordingly, they are no longer personally liable for this debt. The United States filed its Complaint on May 23, 2008, seeking to foreclose its interest in the real estate mortgage granted to it on September 7, 1999. any responsive pleading. Fancy Things failed to file

Dwayne and Karen Moritz filed their

Answer on July 24, 2008, which consisted solely of a statement that they did not agree with paragraph 8 of the Complaint. Paragraph 8 dealt with the Moritzes' bankruptcy discharge. stated that the United States was not seeking a deficiency judgment against the Moritzes because they were discharged of their personal obligation on the debt. Rather, the U.S. sought It

to foreclose its interest in the property that was subject to the mortgage with Fancy Things. II. Discussion Summary Judgment is appropriate where there are no material questions of fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c); Celotex Corp. v. 2

Catrett, 477 U.S. 317, 322 (1986).

The moving party has the

burden to produce evidence showing the absence of a genuine material fact, but it may meet this burden by showing an absence of evidence to support the nonmoving party's case. Corp., 477 U.S. at 325. Celotex

The nonmoving party must then go beyond

the pleadings to show specific facts demonstrating a genuine issue for trial. Id. at 324.

The United States has offered evidence showing that Defendants executed a promissory note, an unconditional guaranty, and a mortgage to the United States in exchange for a loan. Fancy Things failed to make payments in accordance with these terms. Finally, the Defendants still owe $71,982.43 to the

United States, and proper service notified the Defendants of the United States' intention to foreclose. The only response from the Moritzes to the United States' claim was given in their Answer when they asserted that they did not agree with paragraph 8 of the Complaint. response to the summary judgment motion. They provided no

While the Moritzes

challenged paragraph 8 relating to their bankruptcy discharge, the United States is not seeking a deficiency judgment against them for that very reason. Whatever their reasons are for not

agreeing with paragraph 8, their bankruptcy discharge did not affect the security interest granted to the United States. See

Johnson v. Home State Bank, 501 U.S. 78, 82-83 (1991) (noting 3

that a bankruptcy discharge "extinguishes only the personal liability of the debtor"). Based on the above, it is clear that the United States is entitled to judgment as a matter of law and the defendants have failed to show a genuine issue for trial, as they are required to do under Rule 56. Since the United States is only seeking to

foreclose their interest in the real estate mortgage granted to it, and is not seeking a deficiency judgment, the defendants have no valid objection to paragraph 8 of the Complaint. The Court

thus GRANTS the United States' Motion for Summary Judgment. IT IS SO ORDERED. Dated this 13th day of November, 2008.

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